S&P/ASX 200 Index (ASX: XJO) gold shares have, as a whole, been shining brightly over the past year.
ASX gold stocks, large and small, have received a welcome boost from a big lift in the gold price.
Twelve months ago, the yellow metal was trading for US$1,760 per ounce. Today that same ounce is worth US$1,948 per ounce, up 11%.
The rising gold price helped drive the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold shares – to an 18% gain over the full year. That compares to a 5% gain posted by the ASX 200.
Here's how some of the top gold stocks have performed in 12 months:
- The Northern Star Resources Ltd (ASX: NST) share price is up 41%
- The Evolution Mining Ltd (ASX: EVN) share price is up 38%
- The Gold Road Resources Ltd (ASX: GOR) share price is up 18%
- The Newcrest Mining Ltd (ASX: NCM) share price is up 36%
And that's not including dividends.
Boom!
With those gains already in the bank, can ASX 200 gold shares continue to outperform?
What's next for ASX 200 gold shares?
While numerous factors will impact the individual miners' performances, the price of the yellow metal they dig from the ground will be a big determinant.
For some greater insight into the outlook for ASX 200 gold shares, we turn to the latest Gold Demand Trends report, from the World Gold Council for Q2 2023.
According to the report, while second-quarter central bank buying dipped year on year in Q2, to 103 tonnes, H1 2023 still saw central banks buying 387 tonnes of bullion. That's an all-time six-month high.
The World Gold Council noted that second-quarter demand was "in line with the longer-term positive trend – indicating that official sector buying should remain strong throughout the year".
Senior markets analyst at the World Gold Council Louise Street commented:
Record central bank demand has dominated the gold market over the last year and, despite a slower pace in Q2, this trend underscores gold's importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world.
What about investors?
Investors also appear likely to help support the gold price, and by connection, ASX 200 gold shares, in the half year ahead. Investor demand for gold bars and coins increased 6% year on year in Q2, to 277 tonnes, bringing H1 investment to 582 tonnes.
And jewellery consumption, spurred by a rebound in demand from China, increased 3% year on year in Q2, which saw jewellery demand reach 951 tonnes in H1.
"Gold has performed exceptionally well this year, especially in Australia, up 7.2% to 30 June," the World Gold Council's head of Asia-Pacific (ex-China) Shaokai Fan said.
Fan added:
Total holdings in Australian gold-backed ETFs remained steady at 41t, down just 0.5% over the quarter, signalling continued appetite for physical gold as a means of investment diversification and a resilient store of value in portfolios.
As for the remainder of the year, gold, and ASX gold shares, would likely perform best in the case of a modest economic slowdown.
According to Street:
Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status. In this scenario, gold would be supported by demand from investors and central banks…
